Antecedents of shopper loyalty in the vietnamese supermarkes

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ANTECEDENTS OF SHOPPER LOYALTY IN THE VIETNAMESE SUPERMARKES
UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Lam Hoang Vu ANTECEDENTS OF SHOPPER LOYALTY IN THE VIETNAMESE SUPERMARKETS MASTER OF BUSINESS (Honours) Ho Chi Minh City – Year 2012 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Lam Hoang Vu ANTECEDENTS OF SHOPPER LOYALTY IN THE VIETNAMESE SUPERMARKETS ID: 60340102 MASTER OF BUSINESS (Honours) SUPERVISOR: DR. NGUYEN THI MAI TRANG Ho Chi Minh City – Year 2012 Running head: ANTECEDENTS OF SHOPPER LOYALTY ANTECEDENTS OF SHOPPER LOYALTY IN THE VIETNAMESE SUPERMARKETS LAM HOANG VU UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business i ANTECEDENTS OF SHOPPER LOYALTY ii ACKNOWLEDGEMENTS I would like to express my sincere thankfulness to my research advisor, Dr. Nguyen Thi Mai Trang, who made me believe in myself and gave me the possibility to complete this thesis. Her guidance helped me in all the time of research and writing this thesis. I am sure that this thesis would not have been possible without her support. I also thank Prof. Nguyen Dinh Tho. I am extremely grateful and indebted to him for his expert, valuable guidance, insightful comments, and encouragement extended to me. I would like to express my gratitude to all ISB staffs that supported necessary materials and helped summit my papers. Especially, I would like to give my special thanks my family for supporting me spiritually throughout my life. Lam Hoang Vu Ho Chi Minh City, December 29, 2012 ANTECEDENTS OF SHOPPER LOYALTY ABSTRACT With a population of 91 million consumers and economic growth rate averaged 6.37 percent from 2000 until 2012, Vietnam has been an attractive foreign investment destination. Moreover, consumer preference has been changing along with higher income, becoming sophisticated and improving living standard in recent years. In addition, Nguyen, Nguyen, and Barrett (2007, p. 228) claim that “little has been paid to transitional markets like Vietnam, where supermarkets are still a new retailing system, appealing primarily to upper class consumers in urban areas of the country”. Therefore, supermarket retailers have to take advantage of new innovations to create their competitive advantages. When a customer goes shop at certain supermarket, what make him/her keeping buying? And what are factors affecting his/her loyalty? The retailers had to find out the answer to identify appropriate strategies for achieving their own goals. Based on that, the study was carried out to reveal the impact of service quality, product quality and assortment, layout, perceived price fairness, and convenient location on shopper loyalty. The study was conducted by the survey questionnaire. A sample of 420 consumers are living and working in Ho Chi Minh City. The result revealed that service quality, product quality, perceived price fairness, and convenient location have positive relationships with shopper loyalty. iii ANTECEDENTS OF SHOPPER LOYALTY TABLE OF CONTENTS ACKNOWLEDGEMENTS ........................................................................................II ABSTRACT ............................................................................................................. III CHAPTER 1: INTRODUCTION ............................................................................... 1 1.1. BACKGROUND .............................................................................................. 1 1.2 RESEARCH PROBLEMS ................................................................................ 2 1.3 RESEARCH QUESTIONS AND OBJECTIVES .............................................. 3 1.4 RESEARCH DELIMITATION ......................................................................... 3 1.5 THESIS STRUCTURE ..................................................................................... 3 CHAPTER 2: LITERATURE REVIEW ..................................................................... 4 2.1 SHOPPER LOYALTY ...................................................................................... 4 2.2 THE ANTECEDENTS OF SHOPPER LOYALY ............................................. 5 2.2.1 Service quality ............................................................................................. 5 2.2.2 Product quality and assortment ................................................................... 6 2.2.3 Layout ......................................................................................................... 7 2.2.4 Perceived price fairness .............................................................................. 7 2.2.5 Convenient location..................................................................................... 8 2.3 RESEARCH MODEL AND HYPOTHESES .................................................... 8 CHAPTER 3: METHODOLOGY ............................................................................ 10 3.1 RESEARCH PROCESS .................................................................................. 10 3.2 MEASUREMENT SCALES ........................................................................... 11 3.2.1 Shopper loyalty ......................................................................................... 11 3.2.2 Service quality ........................................................................................... 11 3.2.3 Product quality and assortment ................................................................. 12 3.2.4 Layout ....................................................................................................... 12 iv ANTECEDENTS OF SHOPPER LOYALTY 3.2.5 Perceived price fairness ............................................................................ 13 3.2.6 Convenient location................................................................................... 13 3.3 QUALITATIVE RESEARCH ......................................................................... 13 3.3.1 Sampling ................................................................................................... 14 3.3.2 Data collection .......................................................................................... 14 3.3.3 In-depth interviews result .......................................................................... 14 3.4 SAMPLING METHOD ................................................................................... 15 3.4.1 Sampling ................................................................................................... 16 3.4.2 Data collection .......................................................................................... 16 3.5 DATA ANALYSIS METHODS...................................................................... 16 3.5.1 Cronbach’s alpha ...................................................................................... 16 3.5.2 Exploratory Factor Analysis (EFA) ........................................................... 17 3.5.3 Multiple Regression Analysis .................................................................... 18 CHAPTER 4: DATA ANALYSIS AND RESULTS ................................................. 19 4.1 DESCRIPTIVE ANALYSIS ........................................................................... 19 4.2 MEASURE ASSESSMENT ............................................................................ 20 4.2.1 Cronbach’s alpha ...................................................................................... 20 4.2.2 Exploratory factor analysis ....................................................................... 21 4.3 HYPOTHESES TESTING .............................................................................. 23 4.4 TESTING THE EFFECTS OF DEMOGRAPHIC VARIABLES .................... 24 4.5 DISCUSSION OF FINDINGS ........................................................................ 25 CHAPTER 5: CONCLUSION AND IMPLICATION .............................................. 29 5.1 CONCLUSION ............................................................................................... 29 5.2 MANAGERIAL IMPLICATIONS .................................................................. 30 5.3 LIMITATION OF STUDY AND FUTURE RESEARCH ............................... 31 REFERENCES ......................................................................................................... 33 v ANTECEDENTS OF SHOPPER LOYALTY APPENDICES .......................................................................................................... 38 Appendix A: Questionnaire ................................................................................ 38 Appendix B: Codified Variables ........................................................................ 40 Appendix C: First Time Running – Eigenvalues ................................................ 44 Appendix D: First Time Running – Factor Loadings .......................................... 45 Appendix E: Second Time Running – Eigenvalues ............................................ 46 Appendix F: Second Time Running – Factor Loadings ...................................... 47 Appendix G: Third Time Running – Eigenvalues ............................................... 48 Appendix H: Charts of Testing Hypotheses........................................................ 49 Appendix I: Result of Affecting of Demographic Variables ............................... 51 LIST OF FIGURES Figure 2.1: A Conceptual Model .......................................................................... 8 Figure 3.1: Research Process.............................................................................. 10 Figure H.1: Histogram of Shopper Loyalty ........................................................ 49 Figure H.2: Normal P-P Plot of Shopper Loyalty ............................................... 49 Figure H.3: Scatterplot of Shopper Loyalty ....................................................... 50 vi ANTECEDENTS OF SHOPPER LOYALTY LIST OF TABLES Table 3.1: Scales of Shopper Loyalty ................................................................. 11 Table 3.2: Scales of Service Quality................................................................... 12 Table 3.3: Scales of Product Quality and Assortment ......................................... 12 Table 3.4: Scales of Layout ................................................................................ 13 Table 3.5: Scales of Perceived Price Fairness ..................................................... 13 Table 3.6: Scales of Convenient Location .......................................................... 13 Table 3.7: Cronbach’s Alpha Reliability Coefficient .......................................... 17 Table 4.1: Sample Description ........................................................................... 19 Table 4.2: Reliability Analysis ........................................................................... 20 Table 4.3: Factor Loadings................................................................................. 22 Table 4.4: Results of Pearson Correlation........................................................... 23 Table 4.5: Results of Standard Multiple Regression ........................................... 24 Table 4.6: Creating and Recoding Variables ...................................................... 24 Table 4.7: Results of Hypotheses Testing ........................................................... 26 Table I1: Model Summary of Testing Male........................................................ 51 Table I2: Model Summary of Testing Younger .................................................. 51 Table I3: Model Summary of Testing Student .................................................... 51 Table I4: Model Summary of Testing Low Income ............................................ 52 vii ANTECEDENTS OF SHOPPER LOYALTY 1 CHAPTER 1 INTRODUCTION This chapter introduces the background of the Vietnamese supermarket industry as well as the status of shopper loyalty. The research questions and objective are proposed to explore the factors determining customer loyalty. Based on these, research delimitation is proposed and thesis structure is presented. 1.1. Background According to “Vietnam Retail Analysis (2008-2012)” (2010), the researchers claimed that “fast pace growth in Vietnam’s retail market has made the country an attractive destination for multinational retailers. Vietnam holds the 4th position among 30 countries attracting foreign investors. As per the WTO agreement, the government has removed limitation on capital invested by the foreign investors.”. “The value of retail sales in Vietnam has rapidly risen over the past few years”. “The retail sales are expected to surge at a CAGR of around 20% during 2010-2012.” C. V (2012) states that although the nation has faced a difficult year, the retail market in 2011 still grew and made up 15-16 percent of Vietnam’s GDP with an increase of 29.3 percent over the previous year. Currently, there are approximately 900 supermarkets, shopping malls, and convenience stores, along with a system of 9,000 traditional markets in Vietnam. Moreover, the spending and consumption habit of Vietnamese people has change a lot in the last few years. As stated in “Vietnam Retail Market Forecast to 2014” (2012), “the modern retail channels are expected to play a crucial role in future growth”. Moreover, it is estimated that the retail sale will continue to grow at a CAGR of around 26% during 2012-2015. In addition, the report also mentioned that Vietnam is one of the world’s five most lucrative retail markets. Therefore, Vietnam’s retail market will attract a number of foreign investors as well as international brands. These researches have pointed out that Vietnam has been considered to be one of the most potential markets in Asia. In addition, foreign firms (like Big C, Metro) have been ANTECEDENTS OF SHOPPER LOYALTY 2 entered the Vietnam retails. That means the domestics retailers have to face the toughest challenges when the foreign firms entering Vietnam retail market. The issues are how the domestic retailers survive and develop in the local retail market. 1.2 Research Problems Yang, Do, Wang, Chang, and Hung (2011, p. 209) claim that 2009 was considered as a crucial landmark for the Vietnamese retail industry with 100% foreign owned retailers allowed under Vietnam’s commitment to WTO. It leads to a new development period and rapid growth in Vietnamese retail market. Domestic retailers have to compete with foreign multinational retailers on market share. In there, foreign firms take advantages of capital and experience to reign over a share of supermarket chains. For example, Metro has a plan to invest $100 million - $ 120 million for each outlet; Big C use $17 million to open supermarket in central Hue. And domestic firms have competitive advantages in proximity locations and understanding local customers. As a result, domestic firms have to enter an extreme race to compete against foreign ones. In order to increase competitive advantages, they choose to expand stores to improve their distributions. For example, Saigon Co.op confidently increases the outlets to reach 120 by 2012; Citimart also hopes to expand 10 more outlets in 2012. Therefore, the appropriate strategies are the most important issue which both parties must consider in order to prevail. According to “Nielsen Shopper Trends” (2011), Vietnam has been faced with inflationary pressures. It has led to some changes in shoppers’ behaviors that have become more price-sensitive (www.nielsen.com). That means they has focused more on value and their demands have been affected by a general increase in price. Otherwise, Vietnamese shoppers still keep shopping at the certain store based on what they are looking for. Consequently, it is necessary to explore the factors which determine consumer loyalty to attract and retain customers. It also helps the firms make decisions in order to select the most appropriate strategies for their goals. ANTECEDENTS OF SHOPPER LOYALTY 3 1.3 Research Questions and Objectives This research is to identify, measure factors affecting shopper loyalty and determine the relationship among them. The proposed research questions are as follows: - Are there identifiable factors affecting shopper loyalty? - What is the relationship between these factors and shopper loyalty? Which will influence shopper loyalty the most? The research objectives are: - To identify factors affecting shopper loyalty in the Vietnamese supermarket. - To determine the impact of each factor on shopper loyalty 1.4 Research Delimitation This study focuses on individual shoppers in Ho Chi Minh City, who have more shopping options than other. Children below 16 years old are not chosen to be respondents. Moreover, the study focuses on attitudinal loyalty. Therefore, this sample cannot represent for Vietnam nationwide. In addition, there are five factors including service quality, product quality and assortment, layout, perceived price fairness, and convenient location which are considered as the antecedents of shopper loyalty. 1.5 Thesis Structure This thesis is organized as follows: - Chapter 1 presents the research background, research problems, research questions and objectives, research delimitation, and thesis structure. - Chapter 2 introduces research model and its hypotheses as well as its literature review - Chapter 3 illustrates the methodology conducted in this paper - Chapter 4 presents research results is based on data collected - Chapter 5 summarizes the research results, provide the findings and recommendations ANTECEDENTS OF SHOPPER LOYALTY 4 CHAPTER 2 LITERATURE REVIEW This chapter is an overview of shopper loyalty and its antecedents which have been conducted by previous researchers. Based on these studies, a conceptual model is proposed. 2.1 Shopper Loyalty Oliver (1996, cited in Donio', Massari, and Passiante, 2006, p. 446) defines customer loyalty as “a deeply held commitment to re-buy or re-patronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior”. In addition, Goodwright (n.d.) defines that “customer loyalty is when an organization receives the ultimate reward for the way it interacts with its customers; and competitive advantage can be achieved through customer loyalty”. Donio' et al. (2006, p. 446) propose three conceptualizations of customer loyalty: “as primarily an attitude that sometimes leads to a relationship with the brand”, “as mainly expressed in term of revealed behavior”; and “ buying moderated by the individual’s attitudes” In short, customer loyalty is one of the most important issues of the firms. The customer will chose one product/service instead of one of other competitors. In other way, when the firm delivers superior value and wins customer loyalty, it ensures that the firms can be continued profitable. That means market share, profitability will be going up and the cost of attracting new customer will go down (Fraenkel, 2009) ANTECEDENTS OF SHOPPER LOYALTY 5 Costabile (2001, cited in Donio', 2004, p. 447) describes the dynamic model of customer loyalty in which customer loyalty is considered as an outcome of attitudinal dimensions including customer satisfaction, trust and commitment. In there, “satisfaction with purchases, and consequential habit formation, explains most of a person’s ongoing propensity to buy one or a product from a specific firm”. Gounaris and Stathakopoulos (2004, cited in Nguyen, Nguyen, and Barrett, 2007, p. 229) claim that there are three main different perspectives of loyalty such as attitudinal, behavioral and reasoned action. Moreover, the attitudinal approach posits that loyalty is based on psychological commitment, purchase intention, and word-of-mouth recommendations. In this research, shopper loyalty refers to strong feelings about loyalty and commitment relative to their supermarkets, to continue purchasing goods in the same supermarket and recommend it to others (Baker et al., 2002; Sirohi et al., 1998; Zeithaml et al., 1996, cited in Nguyen et al., 2007, p. 229) 2.2 The Antecedents of Shopper Loyalty 2.2.1 Service quality. Service quality is defined as “an overall assessment of service by the customers” (Lewis and Booms, 1983, cited in Ganguli and Roy, 2010, p. 405). In the retail industry, service quality is measured by interacting between customers and firm employees. That means “quality evaluations are not made solely on the outcome of a service; they also involve evaluations of the process of service delivery” (Parasuraman, Zeithaml, and Berry, 1988, p.42). Kandampully (1998, p. 443) states that service quality is a critical and indispensable factor in persuading customers to use a particular service provider instead of another. In addition, customers in service industries will switch into other firms if they have the feeling of disconnection from the current service provider for many reasons including inconvenience, core service failures, failed service encounters, and response to failed service encounters (Keaveney, 1995, cited in Pollack, 2009, p. 45). Therefore, in order to gain customer loyalty, many organizations find it ANTECEDENTS OF SHOPPER LOYALTY 6 essential to maintain service quality on a regular basis (Kandampully, 1998, p. 443). Pollack (2009, p. 45) reveals that service quality is a significant predictor of word-of-mouth and intention to re-purchase. Consequently, it is expected that the higher service quality will be more loyal to supermarket. H1: There is a positive relationship between service quality and shopper loyalty. 2.2.2 Product quality and assortment. Garvin (1987, cited in Yuen and Chan, 2010, p. 225) proposes eight dimensions of product quality such as performance, features, conformance, reliability, durability, serviceability, aesthetics, and customer-perceived quality. The recognition of product can be considered as an initial stage for developing customer satisfaction and creating customer loyalty (Eduardo, Arturo, and Jorge, 2008). Kotler and Keller (2006, cited in Yuen and Chan, 2010, p. 227) claim that the better the possibility of delivering quality products, the higher the level of maintaining customer satisfaction “which encourages customers to make their next purchases”. Mantrala et al. (2009, p. 71) state that by striking appropriate balance among variety, depth, and service levels, the retailers expect to satisfy the customer needs by delivering the right merchandise in the right store at the right time. When the retailer doesn’t meet the expected assortment, customers will switch to another one which leads to the loss of both current and future sales. In addition, the more congenial the merchandise on the shelf is organized to the customers’ preference (Alba and Hutchinson, 1987, cited in Mantrala et al., 2009, p. 74), the easier the information about the items is processed (Fiske and Taylor, 1991, cited in Mantrala et al., 2009, p. 74). H2: There is a positive relationship between product quality and assortment and shopper loyalty. ANTECEDENTS OF SHOPPER LOYALTY 7 2.2.3 Layout. According to Aghazadeh (2005), there are three principles of layout including circulation, coordination, and convenience. Among these, circulation includes many factors such as location, size, shape, and character of merchandise which control the traffic flow throughout the store. Coordination is the ability to control customer movement or predetermined impression on the customer by combining goods and space; and to create the desired atmosphere. Finally, convenience is arranging items to cater to various customer needs by emphasizing on the management’s policy, the character of the merchandise, and the character of the customers. Huddleston, Whipple, and VanAuken (2004, p. 225) point out that “a store with a consistent layout in different geographical areas and stores with wide aisles and less congestion are more likely to satisfy customers”. In addition, Wilson (2007, p. 126) reveals that store layout has a great impact on customers “when a store remodeled or a new store is built”. Thus, we propose that there is a positive relationship between layout and shopper loyalty. H3: There is a positive relationship between layout and shopper loyalty. 2.2.4 Perceived price fairness. Pan and Zinkhan (2006, p. 230) state that “shopping channels are significantly different in terms of the general price levels for products sold”. “Low prices, in the form of either price promotions or general price levels, can create store traffic and increase category sales”. However, there are consumers who are willing to pay more for quality called price-seeking (Tellis and Gaeth, 1990, cited in Pan and Zinkhan, 2006, p. 230) Zeithaml (1998, cited in Bei and Chiao, 2001, p. 129) states that the perceived price is based on the consumer’s viewpoint which “is more meaningful than monetary price”. If consumers realize that the price of a service or product is fair, they will be encouraged to continue to re-purchase (Lee, 1998, cited in Bei and Chiao, 2001, p. 130). Bei and Chiao (2001) point out that perceived price ANTECEDENTS OF SHOPPER LOYALTY 8 fairness has impact on customer loyalty. In addition, Brumley (2002) claim that perceived price fairness has positive impact on shopper loyalty. H4: There is a positive relationship between perceived price fairness and shopper loyalty 2.2.5 Convenient location. Rowley (2005, p. 578) states that it is difficult to create the differentiation strategies for supermarkets through price, quality and product range without concerning convenient location. In addition, Huff (1964, cited in Piron, 2001, p. 49) consider location as one of the most popular factors influencing store choice. Michels and Bowen (2005, p. 7) claim that store location and ease of access have significant impacts on the re-patronage intention. Koo (2003, p. 61) proposes that among three factors: location, merchandising, and after sales service which affect store loyalty, location is the most influential. Thus, it could be expected that convenient location have a positive influence on customer loyalty. H5: There is a positive relationship between convenient location and shopper loyalty. 2.3 Research Model and Hypotheses Based on the above studies, a conceptual model is proposed. Details about a conceptual model and it hypotheses as follows: SERVICE QUALITY H4 (+) H1 (+) PERCEIVED PRICE FAIRNESS SHOPPER LOYALTY PRODUCT QUALITY AND ASSORTMENT H2 (+) H5 (+) H3 (+) LAYOUT Figure 2.1: A Conceptual Model CONVENIENT LOCATION ANTECEDENTS OF SHOPPER LOYALTY 9 H1: There is a positive relationship between service quality and shopper loyalty. H2: There is a positive relationship between product quality and assortment and shopper loyalty. H3: There is a positive relationship between layout and shopper loyalty. H4: There is a positive relationship between perceived price fairness and shopper loyalty. H5: There is a positive relationship between convenient location and shopper loyalty. ANTECEDENTS OF SHOPPER LOYALTY 10 CHAPTER 3 METHODOLOGY This chapter includes five parts: the first part is research process in which is the way to conduct research will be presented; the second part is measurement scales; the third part is the results of in-depth qualitative research interviews; the forth part is sampling methods; and the last part introduces the methods to analyze data. 3.1 Research Process This study is conducted as given in the chart below (Figure 3.1) Problem Literature definition review Research model Measurement scales Qualitative research Official scales Quantitative research Assessment of measurement (Cronbach alpha, EFA) Testing of hypotheses (Standard multiple regression) Figure 3.1: Research Process ANTECEDENTS OF SHOPPER LOYALTY 11 The starting point of the process is the identification of research objectives based on the definition of problems in retail markets. So, the end point is the results of hypotheses testing by using standard multiple regression. 3.2 Measurement Scales This part includes measurement scales of shopper loyalty and its antecedents adapted from Allaway et al. (2011) and Nguyen et al. (2007) 3.2.1 Shopper loyalty. Scale items of shopper loyalty are adapted from Allaway et al. (2011, p. 192) and Nguyen et al. (2007, p. 239) Table 3.1 Scales of Shopper Loyalty No. Item 1 I care about the long-term success of this store 2 I have faith in this store 3 This store gives me a feeling of confidence 4 I trust this store 5 I would expend effort on behalf of this store to help it succeed 6 I say positive things about this store to others 7 I am “emotionally attached” to the store 8 I feel loyal to this store 9 I have a sense of belonging to this store 10 I am going to do my shopping in this store in next few weeks 11 I will recommend this store to someone who seeks advice 12 I am very committed to this store 13 Shopping in this store is my first choice 14 I encourage my relatives and friends to go to this store 3.2.2 Service quality. Service quality was measured base on Allaway et al. (2011, p. 193), it shows in Table 3.2.
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